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Strategically Pricing


This article discusses what business owners should consider when pricing their products and what strategies to use in order to successfully grow their business. Most business owners use margins as markups and match their competitors’ prices to price their products. In addition, they should consider what the buyers are actually willing to pay and build and appeal their competitive edge to the buyers to provide them with incentives to purchase from their specific business instead of many others. One strategy discussed as offering a multiple sets of prices, rather than “take-it-or-leave-it” price; businesses will be able to increase sales and profits by providing more options and choices for the customers. I thought of a relevant example of this strategy from a personal experience. When I shop online, the price of the item changes depending on the color of the clothing or size of the shoes. This is a combination of two strategies: letting customers choose how much to pay and providing different offering for price-sensitive customers. Such strategy can be seen as a dominant strategy for both the buyer and the seller, since, as a result, customers gain more options and are encouraged to consider weigh their preferences of different versions of the product, while the businesses gain additional profit from those whose value of the product is not matched by the product’s price for a certain color, but is matched (or is higher) for another color.

Many of the pricing strategies discussed in the article involved the topics covered in class, such as auction strategies based on the bidder’s value and the seller’s set price, market clearing price, and even the idea of dominant strategy in game theory. When pricing the products, the author emphasizes the importance of taking into consideration, “what the customers are actually wiling to pay”, which is equivalent to what we learned in class as the buyers’ true value of the product. The key is to not only consider external factors such as competitors’ prices, but also to strategize according to the buyer’s values and their options.


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October 2016